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They hire an adviser to handle the bulk of their investments, presumably because they trust his or her skills.

But they also keep a self-directed brokerage account on the side, pitting their own financial expertise against that of the professional.

The issue could be much bigger than most advisers believe: In a recent survey reported by Boston-based research firm Cerulli Associates, about three- quarters of investors who worked with advisers had a self-directed account, too. But advisers believed just 17% of their clients had these accounts.

The investors cited a variety of reasons for having such accounts. The most common was to save and invest for a specific goal, like retirement or education expenses. However, 18% of the households surveyed said they use them to experiment with their own investment ideas.

It's important that advisers know whether a client has a "play money" account, says
Scott Smith,
associate director at Cerulli. An adviser's asset-allocation design, for instance, can be undermined by a client who has significant exposure outside the relationship, Mr. Smith says.

ENLARGE

But tread carefully. Mr. Smith cautions against implying that the client isn't capable of handling a portion of his or her own finances.

"Try to get as much information as you can, but insisting on those being part of your world view is a dangerous proposition," he says.

Al Depman, a practice-management consultant in Rochester, Minn., says most advisers he works with don't discourage clients from having small accounts on the side, as long as the accounts make up only a minor piece of the client's overall portfolio.

Having such an account could scratch an investor's "investment itch," he says, and serve as an educational tool. "If the client has money they are managing on their own, they're going to recognize how difficult it is and they'll understand the issues an adviser is facing on a daily basis," Mr. Depman explains.

Advisers may find more clients interested in play-money accounts if the stock market continues to climb from its financial-crisis lows.

The activity tends to be popular during bull markets, when it can be easier to beat an adviser's performance with riskier bets, notes Skip Schweiss, managing director of adviser advocacy at TD Ameritrade Institutional. But when the crash comes, he says, investors hand that money back to the experts.

That is what adviser
Ron Weiner
experienced during the tech bubble of the late 1990s. Enough clients were asking for "esoteric Internet stocks" that he decided to open separate non-fee-based accounts in which the firm would simply make the trades the clients requested.

"We did that out of self-preservation, in that we didn't want them to bother our allocations," says Mr. Weiner, chief executive of RDM Financial Group Inc., a Westport, Conn., firm with $600 million in assets under management. "We're more moderate so we decided to segregate our performance from the outside risk, which proved absolutely wrong for a period of time and totally right at the end of the day."

Keeping those accounts in house allowed Mr. Weiner to monitor them for both tax and allocation purposes. By 2003, after the tech bubble burst, every one of those clients had given him back their play-money assets, he says.

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